Saturday, March 23, 2013

What happens if Cyprus' banks collapse? If its government goes broke? If it leaves the euro?

The European Union, the International Monetary Fund, the European Central Bank and the country's leaders are trying to find a deal to secure a €10 billion loan for Cyprus and stave off a failure of its banking system. The Cypriot parliament has already rejected one deal, which would have taxed all bank deposits in the country. The ECB has now put a ticking timer on this drama by declaring it would cut off emergency support to Cyprus' banks on Monday if no deal is found.

That's the worst case.

Even if a deal is found, the messy decision-making over the past week will have shaken confidence in Cyprus and the euro currency union itself. Here's what's at stake.